Published 4:00 am, Thursday, January 17, 2002

2002-01-17 04:00:00 PDT Washington -- Sen. Edward Kennedy, D-Mass., called yesterday for postponing $350 billion in scheduled tax cuts for Americans earning more than $130,000 a year, becoming the most senior Democrat to propose a rollback of the tax cut that was the signature accomplishment of President Bush's first year.

Kennedy's speech prompted gleeful attacks from Republicans as both parties jockeyed to set markers for an issue that could shape the next two elections. White House press secretary Ari Fleischer said the leadership of the Democratic Party "aches in its bones to raise taxes."

Much of the $1.35 trillion 10-year tax cut Congress passed in May is scheduled to be phased in between now and 2010, with many of the biggest benefits loaded on the end. Kennedy, in an address at the National Press Club, said the nation "can and should postpone a portion of the future tax cuts that overwhelmingly benefit the wealthiest taxpayers," and use the money on other priorities such as education and health care.

Kennedy said families earning less than $130,000 a year and filing joint returns would not be affected. "No taxpayers would pay a higher tax rate than they pay now," he said.

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Daniel Mitchell, a tax specialist at the Heritage Foundation, said Republicans were salivating after the speech. "I can't open my e-mail without finding 10 messages saying, 'Let's exploit this -- Kennedy's giving us just the opening we need,' " he said.

Republicans hope to capitalize on what they say are Democratic divisions on taxes. Jim Wilkinson, a White House communications official, said Democrats "are divided into at least three separate camps when it comes to tax increases:

the Senate Democrats who want to raise taxes; the 12 Senate Democrats who voted for the tax relief; and the Senate Democrats who want to attack tax cuts yet refuse to call for their repeal."

Senate Majority Leader Tom Daschle, D-S.D., said in a speech Jan. 4 that the tax cut "probably made the recession worse." But he did not call for repealing future phases of it. Democratic strategists scoffed at the notion that positions taken by Daschle and Kennedy will create serious new divisions that can be exploited by Republicans.

Kennedy often takes positions to the left of other Democrats, and one party strategist said Daschle "has tried to establish a consensus position that refocuses on economic issues without alienating the people who reflect the whole range of views within our party."

Geoff Garin, a Democratic pollster, said Kennedy's speech "makes Daschle's position the new middle ground."

Most Senate Democrats voted against Bush's tax cut but the 12 who voted for it included virtually all of the moderate Democrats who are up for re-election this fall in GOP-leaning states, including Daschle's own South Dakota colleague, Sen. Tim Johnson.

Kennedy proposed retaining the estate tax (which Republicans call "the death tax") for estates worth more than $4 million, which Kennedy said includes less than 1 percent of all estates. His office said that would save $130 billion over 10 years. He also wants to postpone the marginal rate cuts scheduled to take place in 2004 and 2006 for the 31 percent, 36 percent and 39. 6 percent tax brackets. His office said that would save $220 billion over 10 years.